NNE emerges from 2019 with a solid result and a focused business - ready to drive digitalization and green initiatives in Danish pharmaceutical production
Novo Nordisk-owned NNE’s financial statements for 2019 show a solid result in primary operations of DKK 67 million in the Danish parent company. This is despite a decline in revenue relative to previous years, where there were large production investments from Novo Nordisk in particular. The declining revenue is, to a greater extent, an expression of a market undergoing great change, as well as a focused strategy from NNE to bring more innovation and sustainability into Danish pharmaceutical production.
NNE specializes in providing engineering services to the pharmaceutical industry and has for several years focused on growing its business in both the Danish market and in the company's subsidiaries that include, among others, Central Europe. In 2007, this area became part of the group through the acquisition of the German engineering company Pharmaplan.
“We acquired Pharmaplan in 2007 with the intention of growing the company globally and therefore building and utilizing our strong global knowledge to support both our owner and other global pharma companies. This strategy has given us a fantastic portfolio of knowledge and experience from projects around the world. But with increasing pressure on the pharmaceutical industry worldwide, a global growth strategy with a higher risk profile no longer makes sense for NNE,” says Jesper Kløve, CEO since 2015.
Therefore, in 2019 NNE chose to divest its subsidiaries in Central Europe to simplify the organization and focus on ensuring profitability and competitiveness in its core markets in Denmark, the USA and India.
In addition to a lower risk profile globally, NNE strengthened its competitiveness in the Danish market through various streamlining and process improvements in 2019, while also focusing on the company's American business.
A changing Danish market
NNE's Danish market now accounts for 88% of the Group's expected turnover in 2020, and since 2015 has been characterized by several major investments from Novo Nordisk to upgrade insulin production capacity in Denmark. These large investments, together with a continuous build-up of business outside Novo Nordisk, have allowed NNE's Danish unit to deliver stable sales of between DKK 1.2 - 1.4 billion since 2015.
“In recent years, the Danish business unit has been solid. These large investments have allowed NNE to grow significantly, playing a role in most of the major investment projects in the pharma market. At the same time, NNE has managed to build strong relationships and do good business with a large number of core customers in Denmark."
The fact that NNE's turnover in Denmark in 2019 fell to around DKK 1 billion is primarily due to a natural decline in Danish investments from the parent company Novo Nordisk, which is currently making huge investments to establish the world's largest insulin factory in North Carolina, USA. While this has meant growth for NNE in the US, which plays an important role in executing the project, it has unfortunately meant downgrades of around 100 employees in the Danish unit in 2019.
“We have done what we could to avoid these redundancies. But in a year of major changes in our project portfolio, where the average size of investment projects in the market has reduced significantly, it has unfortunately been necessary. And considering all these changes, we still delivered a good result in 2019”, continues Jesper Kløve.
The Danish unit will deliver a profit of DKK 67 million in operating profit in 2019, which gives a profit margin of 6.9% compared with 7.5% in 2018. Despite a slight decline in profit margin, NNE sees this as a strong result considering market changes and compared to the general level of the engineering industry, which usually has a 3-5% profit margin.
As a consequence of the changed composition of investments in the pharmaceutical segment of the Danish engineering market, NNE also had a clear ambition to strengthen cooperation with customers other than Novo Nordisk in 2019. This resulted in several new customers in the pharmaceutical industry, thereby increasing sales outside Novo Nordisk to 32% of total revenue. According to Jesper Kløve, this is expected to continue going forward. NNE in Denmark will continue to focus on ensuring a balanced turnover between Novo Nordisk and other pharmaceutical manufacturers while looking at new interesting segments of the market such as medical cannabis production, which is currently undergoing solid growth in Denmark.
Optimization, digitization and sustainability must drive pharmaceutical production of the future
“I do not see the lower level of revenue in Denmark as an indication that our business is disappearing - it is just changing character. This is a natural development based on several years of massive investments from Novo Nordisk to build production capacity in Denmark. Like 2019, the years to come will reflect a more 'natural' level of investment in the Danish pharma engineering market - a market characterized by optimization, digitization and green conversion of existing production facilities, rather than capacity building. This is where we want to help our customers,” says Jesper Kløve.
For this reason, Jesper Kløve and his management team have chosen to invest all funds into several innovative initiatives. These range from NNE’s approach to customers, to upgrading competencies and services within 'Manufacturing Intelligence', sustainable design and solutions, services within 'operational excellence' and utilizing digitalization and 'data science' to increase efficiency in clients' drug production.
Adm. Director Jesper Kløve has no doubt that this more focused strategy will contribute to greater value creation for all of the company's customers, covering both smaller start-ups and larger established pharmaceutical manufacturers:
“We are in a changing market. Our customers all face the same challenge, namely increased pressure on drug prices, as well as digitalization and making production more environmentally sustainable. Our decision to focus on business in Denmark, the US and India enables us to deliver maximum value to our customers and owners through an intense focus on innovation, optimization and sustainability."
- NNE currently has around 900 employees globally, of which approx. 150 employees are located in Bangalore, India, approx. 50 employees in North Carolina, USA and approx. 700 employees in Denmark, distributed in Virum and Kalundborg.
- NNE expects stable sales in the Danish market in 2020 and onwards, as well as strong growth in both subsidiaries in the US and India.
- NNE is wholly owned by Novo Nordisk A/S
WOULD YOU LIKE TO KNOW MORE?
CEO, Jesper Kløve
+45 3075 6872
CFO, René Holmen Pedersen
+45 3077 6085